What Facebook’s second-largest market reveals about its international ambitions

Facebook announced earlier this year that it now has 100 million active users in India, making that market second only to the U.S. in size. It’s on pace to become the single-largest market as early as the end of 2014–and a startling 84% of Indian users access the platform entirely or mostly via mobile phone. But the company is now hearing the same rumblings about its India business that it dealt with the last couple of years back home as its users made the transition to mobile: Where’s the money? Its average revenue per Asian user is less than a sixth of that of a North American user.

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For the moment, Facebook’s principal mission is to extend connectivity: Those 100 million Indians represent just 8% of the country’s population. “Our focus is to get Facebook to everyone,” says Kevin D’Souza, the company’s head of mobile growth and partnerships in India. “There’s been a lot of investment to make our mobile product the best.”

Last year, Facebook sent a team of developers from California to spend several weeks in the field, playing technological anthropologist and studying how Indians use the service. They spent time not only in the major cities but also in rural India, where Facebook has become a medium choice for, among others, a group of turmeric farmers who use it to quickly share market information for the crop, allowing them to collectively withhold supply when prices drop. The seven engineers and product managers who traveled around the country asked mostly random people all kinds of questions about how they use mobile technology. (I say mostly, because they met with students at Hyderabad University and folks from Facebook’s local tech and carrier partners in addition to average citizens.) The conversations were very much mobile-focused, which signals at least a basic understanding of how the Internet is going to be accessed not just in India but also in many emerging markets. They asked about how many pictures people take, what they do on their phones, and what they wish they could do.

Among the lessons learned: Photo-taking is popular, but photo sharing is less so, largely because of device and network limitations. They also gathered not-so-scientific survey data about what kinds of phones people had and how people used their phone keypads or keyboards. The engineers took their insights back to California, where the lab contains a low-bandwidth network replicating the “flaky connection,” as D’Souza characterizes India’s 2G network, that many Indians use to get online.

The problem is not just about networks, and this is an important thing to remember when considering not only India but also many emerging markets. India has 4G networks–for the past two years, Bharti Airtel, India’s largest telecom operator, with about a quarter of the mobile market, has been rolling them out, starting in the major cities, including Kolkata, Bangalore, Pune, and Chandigarh. But very few Indians have the iPhones and the Samsung Galaxys that can access those networks. The vast majority are still on much cheaper devices, Android phones, from such brands as Micromax and Lava, that cost as little as $40.

The result has been the development of a number of Facebook experiences that are very different than what Westerners are used to. Facebook is accessible in many of India’s languages, and there are stripped-down versions that, among other things, do not show users which of their friends are online and which do not host video or high-resolution graphics. There’s just no way the most basic cell phone, running on a shaky 2G network, can handle that. Hence, also, the SMS-based version of Facebook that offers a rudimentary range of features for feature phones. “The whole product is designed for standalone mobile,” D’Souza says, “and when I say mobile, it should work even you are on a very basic feature phone. Our app works on thousands of devices now. You don’t have to have an email address. All the notifications are available by SMS.”

The majority of the Indian population is extremely price-sensitive when it comes to spending for data, so Facebook has adapted there as well. “If you only have electricity for four hours a day,” D’Souza says, “you might have to choose between watching television and charging your phone.” He has been working with mobile networks to create pricing plans and special promotions that broaden the gateway. “How do we make it more affordable?” he says. “We now have carriers that offer Facebook access for 1 rupee a day [about 1.7 cents].” That was just one of the pricing innovations pioneered by Bharti Airtel. Last year, Bharti Airtel tried a promotion offering three months of free Facebook, sparking what D’Souza calls “a huge spike” in usage. This past April, it began to offer free Facebook access between midnight and 6 a.m. “We know that the carriers feel like Facebook is a good entry to the Internet,” D’Souza says. “Getting people to use Facebook gets them to use the broader Internet.”

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This is how Facebook sees itself: As the most promising entry point to the Internet for the as-yet-unwired population. And the more that Facebook can blur the line so that Indians come to believe that Facebook is the Internet, rather than something you get when you go onto the Internet, the better it’ll be for Facebook.
Another piece of evidence: the “Facebook” button that is being installed on a bunch of phones, including several Nokias. These moves dovetail with Facebook’s Internet.org initiative to connect the next five billion people on the planet. Internet.org has been very aggressive about making Facebook the gateway to the Internet through schemes like it has in India.

Facebook’s core belief is that if it has the biggest audience, it will also be able to sell that to advertisers better than anyone else. Facebook’s reach in India is already greater than that of the country’s biggest radio station, about five times that of its largest English newspaper, and roughly comparable to its top five TV networks. Emerging markets are not oversaturated by marketing in the same way that we have become in the West. Yes, there is radio advertising, billboards, and TV. But especially for the demographics–in India and elsewhere–that do not have TV 24/7, you haven’t reached that point of jadedness. Facebook’s goal, then, is to convince advertisers that they will be able to develop a more organic connection with target audiences on Facebook.

Earlier this year, Facebook asked Kirthiga Reddy, the head of Facebook India, to focus solely on growing the company’s advertising revenues in the country. For all of Facebook’s efforts to understand the Indian user, it signals that the company has done relatively less to tailor its product to serve the Indian advertiser and it is playing catch up. Although it might seem strange that Facebook is just now turning to thinking about how to generate more revenue from its second-biggest group of users in the world, it is consistent with CEO Mark Zuckerberg’s statements that the company won’t start experimenting with monetization until a product has more than 100 million monthly active users. Perhaps India is akin to Instagram in this way.

Reddy’s plan looks a lot like Facebook’s advertising strategy in the United States. When you combine that massive audience with targeting capability that the “old” media do not have, how can you lose? “Everyone here is used to the experience of walking into the local store, and the store owner knows who you are and knows what you need even before you know it,” Reddy says. “With the advent of mass media, you got the ability to reach lots of people, but you lost that element of personalization. We can help make marketing personal again. We can do different creative for men and different creative for women. And we can help marketers reach consumers with the right message.” Reddy’s message sounds remarkably similar to that of Facebook COO Sheryl Sandberg, who routinely speaks of Facebook’s power to personalize advertising.

Reddy says that advertising-product innovations similar to those on the platform side have helped. “In 2013, our central product-marketing team enabled ads on feature phones,” she says. “The advertiser can say: ‘I want this message to go only to feature phone users.’ Or ‘I want this message to go only to smartphone users.’ That allows segmenting–messaging around high-end products for smartphone users and middle-range for feature phone.” Early customers include Unilever, which signed on to use Facebook to relaunch its Vaseline Lip Therapy line in India, and Nokia, which used Facebook to promote new Lumia phones in India. “By far the biggest need is education,” Reddy says. “It’s a new platform. They see some of the potential.” It’s Reddy’s job to connect those dots.

Facebook has reason for great optimism in India, especially on the revenue front, because of the size of the market and the need to reach very specific pockets. Because India is so fragmented linguistically, Facebook has a powerful, exploitable advantage for targeting. But success is far from assured. Is India really the best place to be experimenting, given the relative immaturity of the marketplace in comparison with other countries? The Philippines, where Internet.org is active, actually makes more sense because it has a higher percentage of its population online. And Facebook’s belief that once you start using the Internet via Facebook, you will always use it via Facebook might not prove true. It certainly didn’t for the likes of AOL in the United States.

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Of more concern, perhaps, is that Facebook’s team remains quite small in India. Their team has always been too small for a country so vast in so many ways. They have been hiring, but almost everything remains centered in California, where there did not seem to be a deep engagement with the market beyond those occasional engineers’ excursions. Given all the talk of how important emerging markets are to Facebook’s growth, there may be another way to read D’Souza when he says, “We’re just getting started.”

A version of this article appeared in the July/August 2014 issue of Fast Company magazine.

About the author

Jeff Chu writes on international affairs, social issues, and design for Fast Company. His first book, Does Jesus Really Love Me?: A Gay Christian's Pilgrimage in Search of God in America, was published by HarperCollins in April 2013.